Posted on Tuesday, March 13, 2018
So where do you stand when a couple announce they will be going their separate ways? What happens to the joint deposit? And what if one half of the couple wants to stay?
Michael Morgan, Director of Dispute Resolution at Tenancy Deposit Scheme (TDS), explains what happens when relationships turn sour and examines how TDS solved a real life dispute between two tenants. The Tenancy Deposit Scheme offers two services, a platform to enable landlords and agents to comply with tenancy deposit protection legislation and an alternative dispute resolution service for if the two parties cannot reach an agreement on the division of the tenancy deposit at the end of a tenancy.
Michael said: “Disputes we receive about deposits can involve more than the usual claims for cleaning or damage – and often relate to disputes between the tenants themselves.
“The following scenario is based on a recent dispute presented to TDS for adjudication. “Mr & Mrs Smith reached the end of their tenancy, but also the end of their relationship. “They faced some claims from the landlord for cleaning and damage, which were modest and justified, leaving the major part of the deposit to be returned to the tenants. “Mrs Smith said that she paid the full amount of the deposit and produced a copy of the cheque, in her own name, that she gave the landlord at the start of the tenancy.
“Mrs Smith demanded she receive the return of the undisputed balance of the deposit in full. “Mr Smith didn’t deny Mrs Smith wrote the cheque, but argued it was still a joint deposit paid jointly. “He believed he and Mrs Smith should each receive half the undisputed balance of the deposit. “The tenancy agreement referred simply to the deposit amount paid by the joint tenants. “TDS’s view on this conundrum was that the tenancy agreement referred to a deposit paid by joint tenants and that the cheque from Mrs Smith in itself did not prove that she was solely responsible for the deposit. “In returning the undisputed balance of the deposit to the tenants, TDS explained that it would assume that it was to be returned in equal shares, unless the tenants both agreed to the contrary.
“Of course, that was never likely to be forthcoming and TDS paid Mr & Mrs Smith in equal shares.”
If Mrs Smith was indeed paying the deposit from her own funds, the landlord is not to know whether the intention was for the deposit to be returned to her in full. In the absence of any indication on that, the only assumption that can be made is that a deposit paid for or on behalf of joint tenants is to be returned to those joint tenants equally. Mrs Smith might therefore want the tenancy agreement to stipulate that the deposit has been paid by her and is to be returned to her alone. The tenants could reach the same agreement as part of their end of tenancy negotiations, but it is by no means certain that they will. What if one party wants to stay? So, what would happen if Mrs Smith wanted to leave during the fixed term of the tenancy and to be released from her obligations as soon as possible. Mr Smith on the other hand wanted to remain at the property, with a new joint tenant and for the existing tenancy deposit to be transferred across to the new tenancy.
The situation is a complex one. TDS has produced a checklist for landlords in this situation – and said they should refer to this before agreeing to anything. Alternatively, if Mrs Smith chose to leave the tenancy and Mr Smith wanted to continue the tenancy alone, both parties would still remain joint and severally liable for ensuring the full rent costs are still met. Therefore, to avoid any problems, best practice would be to arrange for a new tenancy agreement to be created with Mr Smith being the sole tenant and therefore solely responsible for meeting the requirements of the tenancy agreement. Before signing the new tenancy agreement, an arrangement should be made between the parties as to what will happen to the existing deposit. An example of how this could be dealt with would be for Mr Smith to ‘top-up’ the deposit by the amount that Mrs Smith’s claims is her share and therefore becoming the only relevant person in relation to that deposit. Again, we would advise that written confirmation is obtained from Mrs Smith stating that once her share of the deposit is returned to her, no further claims will be made on the remaining deposit.
Tenancy Deposit Scheme is a government approved, not-for-profit company that provides Insured and Custodial tenancy deposit protection. We protect over 1.3 million deposits across England and Wales and offer a free dispute resolution service to help resolve disputes that may arise between landlords, agents and tenants; via an impartial adjudicator.
We here at Hawkins are licensed members of ARLA (Association of Residential Letting Agents) and are on hand to answer any of your rental queries. Contact us today.